Quote from: smscotten on August 06, 2013, 05:41:02 AM

I think what OP is getting at is that there will be a perceived decrease in scarcity when there are more readily-available outlets for people to trade in Bitcoin. Now you sort of have to know someone who knows someone or know the secret handshake. The amount of work or knowledge necessary to obtain Bitcoin will in fact decrease. The cost to obtain Bitcoin (separate from its trading value) will go down.

A good analogy for why this doesn't match up with reality is this:

Imagine a store that sells only one thing. Lets say it is hot cocoa. This store is at the top of a big hill which is surrounded by trees and covered in snow. Everyone in the town near the hill is shivering and cold, because they have never heard of hot cocoa. One person climbs to the top of the hill, which is very difficult because the snow is deep and the hill is treacherously steep. That person gets to the top and the proprietor of the store has four steaming hot cups of cocoa, which the proprietor offers him at a dollar per cup.

The climber, however, has left his wallet at home. He fishes through his pockets and finds a dime. He says, "sorry, that's all I've got." The proprietor looks around, sees he has no other customers and is unlikely to sell any of his cocoa, and says, "what the heck, no one wants this stuff anyhow" and sells the cocoa for a dime.

The next day, the climber brings three friends, and they've all brought their wallets. It's a tough climb to the top but everyone gets to the cocoa store and spends a dollar on the hot cocoa. Everyone feels so much better after a lifetime deprived of hot cocoa that on the way down they start shoveling a trail through the snow to make it easier to get to the top of the hill.

The following day, there are eight people. The trail made climbing the hill much easier. They all get to the top, but there are only four new cups of cocoa. The first four people get their cocoa, and when it comes to the fifth, they ran out. So one person without cocoa offers one of the people with cocoa a dollar for half of their cup of cocoa. The first people in line dole out half their cocoa, make their dollar back, and think, awesome! I just got my cocoa for free!

A few months later, there is a road going to the top of the hill and regular bus service. Everyone wants cocoa and it's not hard to get to the store anymore. The proprietor is trying his best to make as much cocoa as he can but even hiring a couple of people to help he can't make more than a hundred cups of cocoa because the cocoa machine only makes one cup at a time. But four hundred people are visiting every day because everyone knows where the cocoa shop is and how much better it feels to shiver in your wintry fairytale existence with a belly full of cocoa, and no one has to work hard at it, just hop on the bus.

Um. Then the writer realized he'd spent a half hour of his life on a stupid fable about cocoa. A half hour he'll never get back.

The moral of the story is: some people, like me, ought not be allowed on the Internet.

The end.

I think you left out a very important aspect that your story does not address, and I think you should give yourself more credit, because your story was interesting to me! If the shop owner wanted to sell the cocoa for 1 dollar, but decided to sell it for .10 cents to the first person because he forgot his wallet. Either this first person basically received 9 cups of cocoa for free(he has basically bought money), or the initial value of the cocoa is now .10 cents(that's what he bought it for) It can be assumed that if the shop owner sold 1 cup for 10% of his original valuation of the cocoa, his $1 valuation of his cocoa is not correct(im not saying higher or lower). Also, if he was willing to sell a 25% stake of his total stock of cocoa for only .10 cents(22.5% loss), It creates a scenario such as what we have seen with bitcoin.
A large portion of the original btc's were sold at very very cheap rates so you run into a very possible scenario of overvalue. For example. if the guy decides not to drink his .10 cent cocoa and instead goes back to town and sells it to someone for $10 and then the guy goes back and buys the other 3 cups for $1 each, but the shop owner says no not gonna happen. Now the guy is left with 10 dollars and no cocoa(He's a day trader, so he's happy he made a good profit, but he has also been alienated by the store owner because he would not sell him his other 3 cups for $1 each(the owner wants everyone to have a taste, i.e support the btc community, don't horde coins, etc).

The shop owner hears through the grapevine that his precious cocoa has been sold for 10x his intended value, and the man doing it has made a profit of nearly 100x(he bought it for .10). So just like any good businessman, he has to increase prices exponentially of its actual value due to the original man selling his first cup for $10. If he sold his original cup for .10 cents and it was then sold for $10 he decides just as the first cup he sold went for 100x it was originally bought for(.10 cent), he decides to use that same principle on his original valuation of his cocoa. The cocoa now costs $100 per cup. His price had to increase over 1000x its original sale price before he has even made a dime(well he did make 1) The next day people eagerly line up to buy as many $100 cups of cocoa as they can. Turns out there are only 3 more cups left for the day. The first 3 people in line get their $100 cocoa. "Man that's a steal they said" As time passes the demand for his cocoa increases, but he only has 2 cups of cocoa for the next day. He cannot continue charging $100 as it's taking him an increased amount of effort to produce the same amount of cocoa.(increase in difficulty) and he's also running out of cocoa(fixed amount of btc) So he increases the price to $300 per cup. The next day he only has 1 cup and it gets sold for $1000(they love supporting their local cocoa community) The cocoa guy continues to raise his price while at the same time having less and less cocoa available. Eventually he has to sell in quantities lower than 1 cup.(millicoins w/e you guys call them) and people eventually start trading their cocoa for other things because cocoa has gained such a great reputation(average joe adoption). Well, unbeknownst to everyone in the community the man who originally received the first cup of cocoa never actually drank it(he stored,horded,speculated w/e) So it is now known that this one man holds an incredible amount of wealth in cocoa, based on very little if any risk.

No matter how much the people love their cocoa, are they really going to allow this one man to hold so much wealth and control over them just because he has the cocoa? I don't believe so(some may say that is the situation today), and just by the very nature of how being wealthy works there is only so much you can buy with wealth. Think about the billions of dollars bill gates has donated, do you think having one person in control of that much wealth devalues or increases the value of the wealth in which they are measured in? In the case of the man with the cup of cocoa, his inability to meet the needs or expectations of an economy that bases worth on an exponential overvalue of a currency will inevitably lead to a redistribution of the wealth because of his inability to spend all of his money at the current valuation, thus causing a devaluation in currency. Similarly to what has happened with the USD.

The reason this situation is plausible is because of the cheaply aquired btc's and the millions of bitcoins that have been reported lost. If at somehow in time a method is found to retrack those coins and make them usable there will be a massive spike in supply of coins in relation to how much an actual coin can buy you at that time.

http://en.wikipedia.org/wiki/Supply_shock